Technical Stock Market Report

August 16, 2014

The good news is:   Last week new lows declined for the first time in over a month.

The negatives:  New highs picked up last week, but remain near their recent lows of the past 2 years.

The chart below covers the past 6 months showing the NASDAQ composite (OTC) in blue and a 10% trend (19 day EMA) of NASDAQ new highs (OTC NH) in green.  Dashed vertical lines have been drawn on the 1st trading day of each month.

OTC NH rose slightly last week, but remains near its lowest point of the past 2 years.

The next chart is similar to the one above except it shows the S&P 500 (SPX) in red and NY NH has been calculated from NYSE data.

NY NH also leveled off last week near a 2 year low.

The next chart covers the past 6 months showing the OTC in blue and a 40% trend (4 day EMA) of NASDAQ new highs divided by new highs + new lows (OTC HL Ratio), in red.  Dashed horizontal lines have been drawn at 10% levels for the indicator, the line is solid at the neutral 50% level.

OTC HL Ratio recovered to the neutral line.  If it turns around in the next few days it will be establishing a pattern of sharply declining highs.

The positivesLast week new lows declined and new highs increased.

The chart below is similar to the previous chart except is shows the SPX in red and NY HL Ratio has been calculated from NYSE data.

NY HL Ratio recovered well into positive territory last week.

The next chart covers the past 6 months showing the SPX in red and a 10% trend of NYSE new lows (NY NL) in blue.  NY NL has been plotted on an inverted Y axis so decreasing new lows move the indicator upward (up is good).

NY NL moved sharply upward last week, five consecutive days of moving sharply upward puts this indicator at the minimum threshold for defining a bottom.

The next chart is similar to the one above except it shows the OTC in blue and OTC NL has been calculated from NASDAQ data.

OTC NL also recovered last week, but not quite as dramatically.

Money Supply (M2)

The money supply chart was provided by Gordon Harms.

M2 growth fell last week.

Conclusion:

The market rallied last week on seasonal strength. 

Can it continue without seasonality in its favor?

I expect the major averages to be lower on Friday August 22 than they were on Friday August 15.

Last week’s negative forecast was a miss.

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Disclaimer: : Charts and figures presented herein are believed to be reliable but I cannot attest to their accuracy.  Recent (last 10-15 yrs.) data has been supplied by CSI (csidata.com), FastTrack (fasttrack.net), Quotes Plus and the Wall Street Journal (wsj.com).  Historical data is from Barron’s and ISI price books.  The views expressed dare provided for information purposes only and should not be construed in any way as investment advice.  Furthermore, the opinions expressed may change without notice.

Mike Burk began developing equity trading systems in the early 1980's.  Through the 1990's he marketed an equity trading system called MIRAT based on breadth indicators, but, primarily new lows.  In the early days of this century he developed the seasonal trading strategies currently used by Alpha Investment Management of Cincinnati.  Mr. Burk has been writing equity market newsletters since the early 1990's.  During the past 10 years the letter observes both breadth and seasonal strategies.
 
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